ESTIMATING THE RETURNS OF SELF-EMPLOYED AND SALARIED WORKERS IN MALAYSIA
Keywords:
Economics of education, Human capital, Rate of return, Wage earners, Labour economicsAbstract
Evidence from the literature suggested that there is a positive relationship between education and earning. However, to what extent the returns differ according to the choice of individual’s economics activity remain debatable particularly in developing countries? For various reasons, some would prefer to work independently, but others like to join a formal sector and received earnings frequently. Education returns of wage earners and self-employed workers are the main objective of this study. The method of this study is using Ordinary Least Square estimation on wage equation. Using males sample of a cross sectional data from 2002 to 2004, we found a trend of occupational choice and level of education for the formal sector is positive relatively. This paper argues that self-employed workers always obtained higher returns to education than their wage-earning counterpart. The data suggested that for those who obtained a higher credentials are more likely to involve in wage salaries rather than self-employed. A further research need to carry out to support a notation that selfemployed is enjoying a higher return.
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References
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Blanchflower, D.G. (2004). Self-employment: More may not be better. NBER Working Paper 10286, Massachusetts, February 2004.
Becker, G. S., (1993), Human Capital: A Theoretical and empirical analysis with special reference to education. Third Edition. Chicago: The Chicago University Press.
Blau, D. M. (1986). Self-employment, earnings, and mobility in Peninsular Malaysia. World Development, Vol. 14 (7), 839‒852.
Borjas, G. J. and S. Bronars. (1989), Consumer discrimination and self- employment. Journal of Political Economy, 97, 581–605.
Card, D. (1999). The Causal effect on education and earning. In: O Aschenfelter & D Card (ed.), Handbooks of Labour Economics 3.
Card, D. (2001). Estimating the returns to schooling: Progress on some persistent econometrics problem Econometrica, 69 (5), 1127‒1160.
Chung, T. P. (2003). Returns to education: updates for Malaysia. Applied Economics Letters, 10, 837–841.
Chung, T. P. (2004). The Returns to education and training: Evidence from the Malaysian Family Life Surveys. Pacific Economic Review, 9(2), 103‒116.
Garcia-Mainar, I. & Montuenga-Gomez, V. M. (2005). Education returns of wage earners and self-employed workers: Portugal vs. Spain. Economics of Education Review, 24, 161–170.
Constant, A. and Shachmurove, Y. (2005). The comparison of incomes of self-employed and salaried workers among German nationals and immigrants. PIER Working Paper 05-030,
Penn Institute for Economic Research, Philadelphia, University of Pennsylvania.
Hamilton, Barton H. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-Employment. The Journal of Political Economy, 108(3), 604‒31.
Harmon, C. and Walker, I. (1995). Estimates of the economic return to schooling for United Kingdom. The American Economic Review, Vol.85 (5), 1278–1286.
Hawley, J. D. (2004): Changing returns to education in times of prosperity and crisis, Thailand 1985–1998. Economics of Education Review, 23, 273‒286.
Hoerr, O. D., 1973, Education, income, and equity in Malaysia. Economic Development and Cultural Change, 21(2), 247–273.
Hout, M. and Rosen, H.S. (2000). Self-employment, family Background and race. Journal of Human Resources, Vol. 35, 670©692.
Ismail, R. and Bell, D. (2008). ‘Returns to education: New evidence of instrumental variable using Malaysian data. Global Business & Economic Anthology, Vol. II, December 2008.
Ismail, R & Awang, M. (2012). Does the Schooling Reform Affect the Returns to Education in Malaysia? Management Research Journal, 2(1), 39–53.
Kamga, F. B., Kamga, K. A. & Martine, A. (2013). Health and Labour Income of Wage Earners and Self-Employed Workers in Cameroon. IZA Discussion Paper No. 7324, California: Public Policy Institute of California and IZA.
Le, A. T. (1999). Empirical study of self-employment, Journal of economic Surveys, 13 (4): 381-416.
Loftstrom, M. (2009). Does Self-Employment Increase the Economic Well-Being of Low- Skilled Workers? IZA Discussion Paper No. 4539, California: Public Policy Institute of California and IZA.
Mazumdar, D. (1981). The Urban Labor Market and Income Distribution: A study of Malaysia. New York: Oxford University Press.
Mincer, J. (1972). Schooling, Experience, and Earning. National Bureau of Economic Research, Inc., New York.
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Moock, P. R., Patrinos, H. A. and Venkataraman, M. (2003). Education and earnings in a transition economy: the case of Vietnam. Journal of Education Review, 22, 503‒510.
Parker, S.C.(2004). The Economics of Self-Employment and Entrepreneurship. Cambridge, United Kingdom: Cambridge University Press.
Patrinos, H. A. and Sakellariou, C. (2004). Schooling and Labor Market Impacts of a Natural Policy Experiment, Policy Research Working Paper 3459, World Bank.
Pons, E. and Gonzalo, M.T. (2001). Returns to schooling in Spain. How reliable are IV estimates?, Working Paper No. 446, November 2001, Queen Mary, University of London.
Psacharopoulos, G. and Patrinos, H. A. (2002). Returns to Investment in Education:A Further Update. World Bank Policy Research Working Paper 2881, September 2002, Latin America and the Caribbean Region, World Bank.
Psacharopoulos, G. and Patrinos, H. A. (2004). Returns to Investment in Education: A Further Update. Education Economics, 12(2), 111–134.
Psacharopoulos, G., (1994). Returns to Investment in Education: A Global Update.’ World Development, 22(9), 1325‒43.
Rahmah, I. and Rogayah, M. Z. (2003). Earnings differentials determinants between skills in the Malaysian manufacturing sector. Asian Economic Journal 2003, 17(4), 325–340.
Ryoo, J., Nam, Y-S. and Carnoy, M. (1993): Changing Rates of Return to Education over Time: A Korean Case Study. Economics of Education Review, Vol. 12(1), 71‒80.
Sakellariou, C. (2003). Returns to Formal and Technical Education in Singapore. Education Economics, 11(1), 73‒87.
Schultz, T. P. (1988). Education Investment and Returns, In: H. Chenery and TN Srinivasan (ed.), Handbook of Development Economics, Vol. I. North Holland: Elsevier Science Publishers B.V.
Spencer, M. (1973). Job market signalling. Quarterly Journal of Economics, 87, 355–374.
Tokila, A. and Tervo, H. (2011). Regional differences in returns to education for entrepreneurs versus wage earners. The Annals of Regional Science, 47(3), 689‒710.
Wang Dewen, Cai Fang & Zhang Guooqing. (2010). Factors influencing migrant workers’ employment and earnings-the role of education and training. Social Sciences in China, XXXI, No. 3, 123–145.
Willis, R. J. (1986). Wages determinants, In: O Eshenfelter & R Layard (ed.). Handbooks of Labor Economics, Vol. 1. North Holland: Elsevier Science Publishers B.V.
Xiaobing Wang, Jikun Huang, Linxiu Zhang & Rozelle, Scott. (2011). The rise of migration and the fall of self employment in rural China’s labor market. China Economic Review, 22, 573‒584.
Blanchflower, D.G. (2004). Self-employment: More may not be better. NBER Working Paper 10286, Massachusetts, February 2004.
Becker, G. S., (1993), Human Capital: A Theoretical and empirical analysis with special reference to education. Third Edition. Chicago: The Chicago University Press.
Blau, D. M. (1986). Self-employment, earnings, and mobility in Peninsular Malaysia. World Development, Vol. 14 (7), 839‒852.
Borjas, G. J. and S. Bronars. (1989), Consumer discrimination and self- employment. Journal of Political Economy, 97, 581–605.
Card, D. (1999). The Causal effect on education and earning. In: O Aschenfelter & D Card (ed.), Handbooks of Labour Economics 3.
Card, D. (2001). Estimating the returns to schooling: Progress on some persistent econometrics problem Econometrica, 69 (5), 1127‒1160.
Chung, T. P. (2003). Returns to education: updates for Malaysia. Applied Economics Letters, 10, 837–841.
Chung, T. P. (2004). The Returns to education and training: Evidence from the Malaysian Family Life Surveys. Pacific Economic Review, 9(2), 103‒116.
Garcia-Mainar, I. & Montuenga-Gomez, V. M. (2005). Education returns of wage earners and self-employed workers: Portugal vs. Spain. Economics of Education Review, 24, 161–170.
Constant, A. and Shachmurove, Y. (2005). The comparison of incomes of self-employed and salaried workers among German nationals and immigrants. PIER Working Paper 05-030,
Penn Institute for Economic Research, Philadelphia, University of Pennsylvania.
Hamilton, Barton H. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-Employment. The Journal of Political Economy, 108(3), 604‒31.
Harmon, C. and Walker, I. (1995). Estimates of the economic return to schooling for United Kingdom. The American Economic Review, Vol.85 (5), 1278–1286.
Hawley, J. D. (2004): Changing returns to education in times of prosperity and crisis, Thailand 1985–1998. Economics of Education Review, 23, 273‒286.
Hoerr, O. D., 1973, Education, income, and equity in Malaysia. Economic Development and Cultural Change, 21(2), 247–273.
Hout, M. and Rosen, H.S. (2000). Self-employment, family Background and race. Journal of Human Resources, Vol. 35, 670©692.
Ismail, R. and Bell, D. (2008). ‘Returns to education: New evidence of instrumental variable using Malaysian data. Global Business & Economic Anthology, Vol. II, December 2008.
Ismail, R & Awang, M. (2012). Does the Schooling Reform Affect the Returns to Education in Malaysia? Management Research Journal, 2(1), 39–53.
Kamga, F. B., Kamga, K. A. & Martine, A. (2013). Health and Labour Income of Wage Earners and Self-Employed Workers in Cameroon. IZA Discussion Paper No. 7324, California: Public Policy Institute of California and IZA.
Le, A. T. (1999). Empirical study of self-employment, Journal of economic Surveys, 13 (4): 381-416.
Loftstrom, M. (2009). Does Self-Employment Increase the Economic Well-Being of Low- Skilled Workers? IZA Discussion Paper No. 4539, California: Public Policy Institute of California and IZA.
Mazumdar, D. (1981). The Urban Labor Market and Income Distribution: A study of Malaysia. New York: Oxford University Press.
Mincer, J. (1972). Schooling, Experience, and Earning. National Bureau of Economic Research, Inc., New York.
Mincer, J. (1974). Schooling, Experience and Earning. New York: Columbia University Press.
Moock, P. R., Patrinos, H. A. and Venkataraman, M. (2003). Education and earnings in a transition economy: the case of Vietnam. Journal of Education Review, 22, 503‒510.
Parker, S.C.(2004). The Economics of Self-Employment and Entrepreneurship. Cambridge, United Kingdom: Cambridge University Press.
Patrinos, H. A. and Sakellariou, C. (2004). Schooling and Labor Market Impacts of a Natural Policy Experiment, Policy Research Working Paper 3459, World Bank.
Pons, E. and Gonzalo, M.T. (2001). Returns to schooling in Spain. How reliable are IV estimates?, Working Paper No. 446, November 2001, Queen Mary, University of London.
Psacharopoulos, G. and Patrinos, H. A. (2002). Returns to Investment in Education:A Further Update. World Bank Policy Research Working Paper 2881, September 2002, Latin America and the Caribbean Region, World Bank.
Psacharopoulos, G. and Patrinos, H. A. (2004). Returns to Investment in Education: A Further Update. Education Economics, 12(2), 111–134.
Psacharopoulos, G., (1994). Returns to Investment in Education: A Global Update.’ World Development, 22(9), 1325‒43.
Rahmah, I. and Rogayah, M. Z. (2003). Earnings differentials determinants between skills in the Malaysian manufacturing sector. Asian Economic Journal 2003, 17(4), 325–340.
Ryoo, J., Nam, Y-S. and Carnoy, M. (1993): Changing Rates of Return to Education over Time: A Korean Case Study. Economics of Education Review, Vol. 12(1), 71‒80.
Sakellariou, C. (2003). Returns to Formal and Technical Education in Singapore. Education Economics, 11(1), 73‒87.
Schultz, T. P. (1988). Education Investment and Returns, In: H. Chenery and TN Srinivasan (ed.), Handbook of Development Economics, Vol. I. North Holland: Elsevier Science Publishers B.V.
Spencer, M. (1973). Job market signalling. Quarterly Journal of Economics, 87, 355–374.
Tokila, A. and Tervo, H. (2011). Regional differences in returns to education for entrepreneurs versus wage earners. The Annals of Regional Science, 47(3), 689‒710.
Wang Dewen, Cai Fang & Zhang Guooqing. (2010). Factors influencing migrant workers’ employment and earnings-the role of education and training. Social Sciences in China, XXXI, No. 3, 123–145.
Willis, R. J. (1986). Wages determinants, In: O Eshenfelter & R Layard (ed.). Handbooks of Labor Economics, Vol. 1. North Holland: Elsevier Science Publishers B.V.
Xiaobing Wang, Jikun Huang, Linxiu Zhang & Rozelle, Scott. (2011). The rise of migration and the fall of self employment in rural China’s labor market. China Economic Review, 22, 573‒584.
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Published
2019-03-06
How to Cite
Ismail, R., & Awang, M. (2019). ESTIMATING THE RETURNS OF SELF-EMPLOYED AND SALARIED WORKERS IN MALAYSIA. Journal of Contemporary Issues and Thought, 3, 127–137. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/987
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